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Office Depot and Office Reportedly in Talks to Merge

The Wall Street Journalreported Monday that the nation’s second and third largest office supply companies, Office Depot (ODP) and Office Max (OMX) respectively, are nearing the final stages of a merger deal. The two companies combined would still trail behind Staples (SPLS) by a considerable margin based on market cap.

With an announcement possible as early as this week, a deal is still not yet finalized and few details are known aside from the fact that the move would take place as a stock-for-stock transaction. Both companies have yet to comment on the news, but could see considerable cost-cutting benefits as a result of the merger. Indeed, there are many instances across the country where an Office Max store can be found within a short distance of an Office Depot. In many instances the two can be found within the same shopping center. A union between the outlets could provide the possibility of merging locations and consolidating sales.

Taken together, the two companies employ about 68,000 people, and enjoy annual sales of about $18.5 billion. These combined figures could conceivably become more profitable were they to be reoriented to one single ownership and business model.

A merger could also help both offset the pressure they are currently feeling from discount chain competitors like Wal-Mart (WMT) and Costco (COST), and the increasingly dominant online-retailer Amazon (AMZN), and is yet another indicator that competition from online-shopping is complicating business for a variety of specific retail outlets.

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